Google Experiencing Vexation Over Indian Taxation and Content

India is miffed at Google for several reasons. The country claims Google isn?t paying their fair taxes and ignores their request to screen offensive content on websites.

India claims that Google?s profit and loss statement is incomplete and does not reflect its real income. Specifically called into question is the handling of net income (after expenses) versus gross (total sales). Adwords income shows distribution fees to Google Ireland that India wants to claim as Indian generated income for taxation purposes. The controversy apparently stems from interpretation of the contract between Google based in India and Google based in Ireland.

Supporting India?s stance, a tax specialist said: "The earnings will come under tax net if the revenue is generated from India, even though the platform may be based offshore." Thus, analyzing 2008-09, India thinks Google India should show greater taxable revenue than submitted on their report.

The other bone India is picking with Google concerns content. Here again, there are two sides to the story. The media was reporting that the country has asked Google, among other large internet companies, to monitor and remove objectionable content prior to it going online. India fears that text or image postings might exacerbate religious or communal tensions. This is a continuation of RIM controversy, which almost lead to a ban on BlackBerry services in India.

India?s Minister for Communications and IT, Kapil Sibal, has been struggling with the issue. His government has been in contact with several Internet companies in an attempt to plug a major loophole in Indian law after offensive religious content and slights to government officials surfaced online.

India’s Information Technology Act was the basis for regulations that require ISPs to remove such objectionable content within 36 hours of discovery and to include warnings in user agreements. Court actions to uphold the regulations have resulted in finger pointing and a stalemate with India-based companies sidestepping the responsibility blame saying the US parent is the one to blame.

The he-said/she said controversy has arisen between Sibal who says India did not request Internet companies to prescreen content while executives of those companies say the minister actually did make such a request.

Google’s stance is that if the content is controversial they won’t remove it because differing, but not illegal, views should be respected. Coming back to tax, that is something Google and other foreign companies should really be worried about.